The Nation

Up Next in Budget Battles: Pay for Medicare Docs

By Sharon Johnson

WeNews senior correspondent

Monday, February 4, 2013

The latest "doc fix" averted a 27-percent cut in Medicare payments to physicians. But don't say phew yet. In this news analysis Sharon Johnson explains how an obscure compensation formula is tearing away at the system from within.

(WOMENSENEWS)--The nation avoided an exodus of physicians from the Medicare program when Congress included a $30 billion "doc fix" in its New Year's eve deal to avert a package of automatic spending cuts and tax increases.

This was a big relief for people who depend on the public older-care health system, a majority of whom are women.

But it took money from other parts of the public health system and did nothing to end uncertainty about Medicare doctor payments, a likely flashpoint in congressional budget debates between now and March 1, when a final plan to reduce the national debt will be announced.

To help pay for some of the $30 billion needed this year to keep Medicare payments stable, Congress reduced by $4.2 billion payments for Medicaid, the government program for low-income Americans, to hospitals that treat an unusually high share of the poor.

"This hurt African American women who are 1.8 times more likely to have diabetes than non-Hispanic whites," says Rep.Marcia Fudge, D-Ohio, who is chair of the Congressional Black Caucus, on her website. "One in four African American women over age 55 has diabetes."

"Ensuring that the 50 million Americans--58 percent of them women--have access to the health care services they need is the new battleground in health care reform," said Cynthia Pearson, executive director of the Washington-basedNational Women's Health Network, an advocacy group of 8,000 individuals and organizations. "Because they live longer and have more complex health needs than do men, they require more physician services."

In 2011, 24 percent of Medicare beneficiaries reported great difficulty finding a new physician because reimbursements for the federal insurance program for the elderly and disabled failed to cover doctors' cost of providing care.

Potential Pay Cut

While reimbursements will remain stable until Dec. 31, physicians face a 32-percent cut in pay in 2014, unless the current formula for setting fees is changed.

Rep.Allyson Schwartz, D-Pa., said that failure to bring Medicare reimbursements into line with costs could worsen the looming shortage of physicians. In 2015, the United States will have 62,900 fewer doctors than needed.

In 1997, the Republican-controlled Congress created a "sustainable growth rate formula" for doctors' pay rates, using Medicare spending in the 1990s as the basis for the formula. The goal was to control Medicare spending by linking it to the growth of the economy.

In the early years, physicians received small increases in their fees because the economy was growing. However, the optimistic assumptions about the growth of the economy failed to materialize after 2002.

Each year, the gap between what the formula says doctors should receive and what it actually costs doctors to deliver care to Medicare patients gets larger. The longer Congress puts off fixing the doctor-pay formula, the bigger the challenge to fix it.

House SpeakerJohn Boehner and congressional Republicans have balked at changing a formula designed to limit Medicare costs. Instead, Congress has passed 15 short-term doc-fixes to keep provider payments stable. These pay-patches have ranged from a few years to 30 days.

Schwartz and Rep.Joe Heck, R-Nev., proposed a bill in May that would scrap the existing system for calculating doctors' Medicare payments. It would stabilize physician reimbursements for the next four years while new payment and delivery modes are tested and implemented to ensure the long-range stability of Medicare funding.

By 2030, Medicare rolls will total about 80 million.

A Second Bill

In addition to the bipartisan proposal by Schwartz and Heck, Sen.Rand Paul, R-Ky., introduced a bill in 2012 that would have eliminated the current formula and given physicians Medicare annual raises equal to increases in the Consumer Price Index up to 3 percent.

Paul, an ophthalmologist, proposed to offset the cost of the bill, which he estimated at $440 billion, by repealing Medicaid expansion and premium subsidy payments under the Affordable Care Act.

Democrats in the Senate, however, rejected this approach because they said it represented a major restructuring of the Affordable Care Act, which they have vowed to oppose.

The Congressional Budget Office estimates that it will cost over $300 billion over the next decade to keep doctors' pay stable. This figure essentially represents the debt that Congress has put on the books by postponing physician pay cuts going back to 2003.

President Barack Obama and Democrats have opposed the so-called sustainable growth formula because they say it is bound to lower doctors' rates of participation in Medicare and older Americans will have a hard time paying for physicians' services out of pocket if the formula is not changed.

The average older person now spends 40 percent of his or her Social Security check on out-of-pocket medical expenses.

Dr.Jeffrey J. Cain, president of the American Academy of Family Physicians, based in Leawood, Kan., calls the current formula for calculating reimbursements "a disaster for physicians and Medicare beneficiaries because it is based on optimistic assumptions about the growth of the economy that have failed to materialize."

His organization of 105,900 family doctors is one of the medical groups lobbying Congress to scrap the formula. It estimates that the typical family practice doctor would have experienced a $27,000 decrease in pay in 2013 had lawmakers stuck to the formula.

"More physicians will be forced to turn away Medicare patients in the years ahead because Medicare reimbursements represent about 25 percent of the typical family doctor's receipts and as much as 80 percent in some cases," said Cain.

The problem will be most acute for people who live in rural areas where there are shortages of physicians. Some patients will have to travel farther for care. Other patients will wait longer for care, which is unwise for people with chronic conditions, such as high blood pressure, that demand ongoing treatments.